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Commercial Leasing FAQs

Read answers to our frequently asked questions regarding commercial leasing below. Our experienced lawyers can offer professional advice for your business on a wide range of leasing matters.

What is a commercial lease?

A commercial lease is a document that sets out the rights and obligations of the owner of a commercial property (known as the landlord or lessor) and a third party that has agreed to occupy the property (known as the tenant or lessee).

There are different types of commercial leases that apply to different circumstances, although they are all forms of commercial leases they are not generally referred to as commercial leases. The following are all forms of commercial leases:

  • Retail leases
  • Commercial leases
  • Licences
  • Sub-leases

Are the terms of a commercial lease negotiable?

In theory, all terms of a lease are negotiable. But your negotiating power depends on your circumstances, and the circumstances of the local rental market. If plenty of commercial space is available, you can probably win many landlord concessions. If your area’s rental market is tight or you are chasing a unique space, you will have considerably less leverage.

Can the agreed terms of a commercial lease be changed?

A lease variation agreed by the parties is a variation of contract.

Is it possible to renew a commercial lease?

If there is a lease option in a commercial lease, a tenant will have the right to renew the lease at the end of the term. Otherwise, the tenant cannot renew the commercial lease. However a tenant and landlord can agree to continue the tenancy on whatever terms they may agree upon.

What are lease options?

Lease options allow tenants, upon meeting certain conditions, to renew their tenancy for an additional period of time at the end of the original term, without imposing any obligation to do so.

How do tenants pay their rent?

The rent is usually specified as a per annum amount payable monthly in advance.

The rent for the initial term is specified in the lease. Any rent review (i.e. change in the rent) will also be specified in the lease. The three most common review methods are CPI, fixed percentage increase and a market review. The relevant review method is generally applied annually throughout the term of the lease. It is common for CPI or fixed reviews during the term of a lease and for a market review to occur at the expiry of the initial term and each option period.

What are some examples of disputes that can arise during a leasing period?

Commercial tenancy disputes can arise in many different ways, regarding conduct that occurs prior to entry into a lease, during a lease, and after it has ended.

During a leasing period, here are some of the situations that may appear.

1. Disputes concerning payment of rent and outgoings

In the case of a tenant not paying rent, that tenant is generally pursued by the landlord with a degree of rigour, particularly where the commercial premises involved are subject to bank finance, which places pressure on the landlord to ensure that the outstanding rent is recovered promptly. In many cases, the failure of the tenant to pay rent regularly arises from a downturn in business which may be due to current economic circumstances, or problems associated with the cash flow of the business.

2. Breach of the covenants of quiet enjoyment / not to derogate from the grant of the lease

Sometimes a landlord will substantially interfere with a tenant’s possession and/or enjoyment of the premises, by doing or failing to do something, either in respect of the premises, or on adjoining premises owned by the landlord.

Every lease contains quiet enjoyment covenants. The covenant of quiet enjoyment will be breached where the ordinary and lawful enjoyment of the premises is substantially interfered with by the acts or omissions of the landlord. A breach will occur where the acts or omissions of the landlord render the premises unfit for the purpose for which the leased premises are intended to be used. A breach may also occur where the landlord interferes with the tenant’s physical occupation of the premises.

How can ABKJ Lawyers help with my businesses commercial lease?

Commercial property leasing is a complex matter. Get the lease wrong and you may end up paying for it for many years. Get the lease right and you'll be in a much better position to reap the rewards, whether you're a tenant or a landlord. ABKJ Lawyers’ commercial leasing solicitors are more than advisors — they're an investment. Their extensive experience in dealing with both large and small businesses, with widely varying needs, means they can advise their clients on almost any issue from business commercial lease that may arise.

 

We have also included some helpful articles on commercial leasing in the ABKJ Blog. Read more about:

If you're looking for an experienced lawyer to discuss your commercial leasing matter, contact ABKJ today.